Technology Adoption Plan: Residential Cogeneration

I Introduction to Technology
The American Society of Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE) defines
cogeneration as the simultaneous production of electrical or mechanical energy (power) and useful
thermal energy from a single energy source such as oil, coal, or natural gas. In some cases the energy
can be provided by a renewable energy source. Technologies currently most suitable for the residential
market include:

• Reciprocating internal combustion based cogeneration systems

• Fuel cell based cogenerations systems
• External combustion Stirling engine based systems

These residential/light commercial cogeneration technologies vary in capacity from 1-100 kW. An average
of 14kW is needed to meet both the electrical and heating demands for a single North American home
1
while 5kW is more than enough to satisfy the electrical requirements .

Reciprocating Internal Combustion (IC) Engine Based Cogeneration Systems

Reciprocating IC engines of less than 30 kW for the residential sector are spark ignited engines based on
the Otto cycle during which a mixture of air and fuel is compressed in each cylinder before ignition is
caused by an externally supplied spark. These systems are mostly run on natural gas, although they can
be set up to run on propane, gasoline or landfill gas. The mechanical power derived from the engine
turns the generator to produce electrical power. Heat provided from hot exhaust gases, cooling water
and engine oil is recovered to meet the thermal requirements of the facility.

Fuel Cell Based Cogeneration Systems

The reaction that powers a fuel cell is an electrochemical reaction where the reactants are separated by a
tight membrane that only allows for the crossing of ions. Depending on the membrane that is used in the
system, differing ions will cross the membrane and move through a circuit to complete the electrical
balance, ultimately producing a current. Fuel cells use hydrogen as their fuel, which is typically derived
from a hydrocarbon fuel such as natural gas. The conversion of fuel to hydrogen is conducted either
through an external reformer or internally to the fuel cell depending on fuel cell type and design. Among
the various types of fuel cell technology in development today, polymer electrolyte membrane (PEM) and
solid oxide (SO) fuel cells have the highest potential for the residential sector.

• PEM fuel cell systems consist of a solid polymeric membrane electrolyte between two platinum
catalyzed electrodes – the anode and cathode. Electrons are conducted between anode and cathode
as usable electric current. The protons then migrate to the cathode, where they combine with oxygen
from the air and electrons from the external circuit to form water and heat in an exothermic reaction.
PEM show promise in the residential sector because of low temperature (typically under 100 degrees
Celsius) and the potential for favorable cost.
• SO fuel cell systems are solid-state power systems that undergo operation at a high temperature
(between 750-1000 degrees Celsius). These systems utilize the ceramic-like material yttria-stabilized
zirconia as the electrolyte layer that oxygen ions cross over. The resulting high grade heat produced
can be used for both space and water heating.

External Combustion Stirling Engine Based Cogeneration Systems

The Stirling engine is an external combustion engine that garners its heat supply from external sources
via a heater or heat exchanger. This allows for the utilization of a wide range of energy sources including
fossil fuels and renewable energy, like solar or biomass. In fuel-based systems, the continuous

1
“Residential Cogeneration Systems: A Review of The Current Technologies” Dr. Ian Knight and Prof. Ismet
Ugursal; April 2005; http://www.ecbcs.org/docs/annex_42_Review_ Residential_Cogen_Technologies.pdf
combustion process takes place outside of the engine, during which the working gas within the engine is
compressed at a low temperature in the compression cylinder and then expands at high temperature in
the expansion cylinder. The modern “free piston” Stirling engine moves the reciprocating elements using
the pressure variations that are produced by the working gas, with the work ultimately being harnessed by
a linear alternator. This technology can be tightly sealed to prevent the leakage of working gas for a
substantial period of time. Meanwhile, the working gas serves as a lubricant and allows for long periods
of diminished friction and wearing, ultimately leading to reduced mechanical maintenance for up to ten
years. Today, free piston Stirling engines are limited to several tens of kilowatts, a range that is suitable
for residential and small scale commercial applications.

The overall efficiency of a cogeneration system is measured by the fraction of the input fuel that can be
usefully recovered as power and heat. The remaining energy is lost as low temperature heat in the
exhaust gases and as radiation and convection losses from the engine and generator. Water is produced
as a combustion product when hydrocarbon fuel is burnt in the presence of oxygen and the water is
vaporized to steam by the heat of reaction. Manufacturers of cogeneration systems relate efficiency to
the lower heating value of the field (LHV). LHV is also defined as the higher heating value of the fuel
(HHV), which is the total heat generated by the fuel combustion, less the energy required to vaporize the
2
water produced during combustion, also known as the net calorific value (NCV) . Efficiency is generally
expressed in terms of both electrical and overall efficiency:

• Electrical efficiency = electrical output (kW)/fuel input (kW)

• Thermal efficiency = thermal output (kW)/fuel input (kW)
3
• Overall efficiency = useful thermal + electrical output (kW)/fuel input (kW)
4
Efficiency capabilities of these three residential cogeneration systems are outlined in the table below :

In a typical power plant, a small portion of the energy contained in the fuel (i.e., typically about one-third)
is converted to electricity while the rest is lost as heat. Residential cogeneration units recover that
otherwise wasted heat to provide space heating or water heating. Essentially the fuel is being used twice,

2
Lower Heating Value (LHV) of a fuel differs from the Higher Heating Value (HHV) by the heat of vaporization of
the water in the combustion products. For natural gas, LVH is approximately 90% of HHV.
3
Ibid.
4
Ibid.
resulting in lower CO2 emissions. Potential energy and carbon savings will vary based on the efficiency
of the cogeneration technology as well as the fuel mix within the particular region being assessed. For
example, the residential cogeneration unit will fair better when compared to a traditional coal fired power
TM
plant as opposed to comparing it to a natural gas combined cycle. Using the Climate Energy freewatt
example below, the EPA MicroCHP model calculates approximately 7,500 lbs of CO2 emission prevented
5
when using the unit in lieu of electricity provided by a coal power plant .

II Market Description and Barriers

The Climate Technology Initiative Team selected residential CHP based on established criteria such as
commercial availability, demonstrated performance, potential cost effectiveness and diversity of players
and technologies in the marketplace. These criteria are provided in Attachment A. This section provides
more details on the residential CHP market and presents the barriers that must be addressed for
successful market penetration.

There are several companies that manufacture residential cogeneration units. Currently, only one of
these manufacturers offers a unit for sale in the U.S. Several other companies are evaluating the U.S.
market.

The following is a list of key manufactures who currently offer/plan to offer units for sale in the U.S.:

Reciprocating Engine Systems: U.S. Commercialization

Climate Energy (Massachusetts)

TM
− freewatt system based on Honda engine
− Thermal recovery for space heating, natural gas fueled
− Warm Air system commercially available June 2007
− Hydronic/domestic hot water system available April 2008
− 1.2 kW electricity, 11,500 Btu/hr thermal
− 22% electric efficiency; 62% thermal efficiency
− Demonstration program underway with NYSERDA and Keyspan (five units to be in houses for
2008/2009 heating system – one monitored by Southern Research Institute under ETV protocols)

Marathon Engine (Wisconsin)

TM
− Ecopower system based on European product
− Thermal recovery for domestic hot water
− 4.7 kW electricity, 40,000 Btu/hr thermal
− 26% electric efficiency
− Over 1,400 systems installed in Europe
− Commercially available in U.S. August 2008
− Ten units currently being installed

Aisin Seiki (Japan)

The ETV program also tested a unit manufactured by Aisin Seiki, Japan who is currently evaluating the
U.S. Market. However, this unit is capable of supplying 6 kW of electricity and 13.5 kW thermal (46,000
Btu/hr), which is considered light commercial demand. ECO Technology Solutions (Virginia) is assisting
Aisin Seiki Co., Ltd. and Mitsui & Co with the demonstration of the system (Aising-60) to identify design
changes needed for successful entry into the U.S. market. A demonstration unit was funded by
NYSERDA at Hooligan's Sports Grille in Liverpool, NY. The system is interconnected with the Niagara-
Mohawk grid, and provides electric and hot water service to the restaurant.

5
Assumptions used include: Boston, Massachusetts (location); Braintree (electricity provider); state average
emission factor; coal power plant; and MCHP emissions factors provided by Climate Energy.
Fuel Cell Systems: Planned U.S. Commercialization

Ballard PEM Fuel Cell (British Columbia)

TM
− Mark1030 system
− 1.3 kW electricity; 1.7 kW thermal (5,800 Btu/hr)
− 33% electric efficiency (HHV); 45% thermal efficiency (HHV)
− Thermal recovery for domestic hot water

North American commercialization planned 2009

− Ebara Ballard is partnering with Tokyo Gas and Nippon Oil to commercialize fuel cell cogeneration
systems for home use in Japan. A number of residential demonstration units have been installed in
Japan, including the Japanese Prime Minister's residence in April 2005.

Ceramic Fuel Cells Solid Oxide Fuel Cell (Australia)

TM
− NetGen system
− 1.0 kW electricity, 1 kW thermal (3,400 Btu/hr)
− Electric efficiency 40%; CHP efficiency 80%
− Thermal recovery for domestic hot water
− North American commercialization planned by 2009
− CFCL is producing limited quantities of NetGen units for collaboration with selected utilities and
appliance manufacturers in order to evaluate SOFC micro-CHP systems and integrate the SOFC
technology into household appliances.

Utility Activities to Date

In November 2005, KeySpan Energy Delivery (i.e., Keyspan Home Energy Services) partnered with
Climate Energy to install a number of residential cogeneration units (i.e., freewattT M) in homes within the
Boston area. It’s important to note that net metering for residential cogeneration is a statutory
requirement in Massachusetts. The Climate Energy freewattTM passed the initial Total Resource Cost
(TRC) test and KeySpan filed a plan to include mCHP in their high efficiency heating equipment program,
which included a $2,000 incentive. Approval of this plan has been delayed almost 12 months due to
issues on the regulatory level (e.g., merging of National Grid and KeySpan). In the meantime, KeySpan
is offering this incentive through its Building Practices and Demonstrations (R&D) Program. Less than 50
units have been installed to date by early adopters. KeySpan is looking to Climate Energy to license
trained installers and only two mechanical firms are currently participating in the program 6 .

NYSERDA is currently working with the ETV program to test and evaluate the performance of the Climate
TM
Energy freewatt unit. Results from the initial verification testing may be available as early as August of
this year.

Market Barriers

1) High cost. The initial cost of the residential cogeneration system is a significant market
TM
barrier. For example, the Climate Energy freewatt unit costs about $10,000 (installed)
compared to roughly $3,000 for a standard furnace. As a result, overall cost effectiveness is
poor for these units, even in areas with net metering. The most financially attractive option is
in areas with high electricity prices and low fossil fuel prices. In addition, the economics of
residential cogeneration units are challenging because of the non-coincidence of heat and
electrical demand in residential applications, impacting system sizing and run time, or
necessitating thermal and/or electrical storage. For example, to meet the full electrical and
thermal demand of a home using cogeneration it would be necessary to install systems that
are oversized in both their electrical and thermal outputs, leading to surplus heat and power
that calls for expensive storage or ultimate waste. Additionally, heat demand in buildings
often follows daily, seasonal and geographic variations. Even in the Northeastern U.S.,

6
Conversation with Matt Dugan, KeySpan Energy, on April 9, 2008.
 using the Boston, Massachusetts example presented in Section I above, the payback is
estimated to be around 12 years (i.e., net metering, back up generation benefit, and ECM
motor benefit). One would expect that as more manufactures and products enter the market,
this initial capital cost will lower over time.

The economic viability of residential cogeneration systems is dependent upon the following
elements:

• Installed cost of each system

• System maintenance costs and retail prices for fuel
• Electricity exportation price
• High retail prices paid by residential consumers for grid supplied energy (and whether
this offsets the high prices of cogeneration systems)
• Techno-economic feasibility (economic cost, environmental benefits, electricity rate
structure)

2) Lack of industry standards. This technology is currently in its infancy, and the
development of industry standards will take time, particularly since the technology is broken
into several sub categories, each with completely different operational modes (external
combustion, fuel cells, internal combustion,etc….). EPA can play a role however in helping
develop analytical tools to compare among technologies. This evaluation tool would allow
purchasers to verify product performance, efficiency, air emissions, bill impacts and energy
use. Over time industry standards will be developed by industry, with EPA’s assistance, but
not before there are several manufacturers of each technology type that are in commercial
operation.

3) Lack of awareness. Today, very few people have heard of residential cogeneration, and
even when told, it is likely that few people could actually come to grips with what the system
is, how it works, and what it means for them. For years, EPA has been seen as both an
effective communications source, and a credible government body to rely on for accurate
information. Over time, EPA will develop both communications materials, speak with the
press, highlight pilot projects, and work through program partners to increase the awareness
of technology options for customers.

Barrier Removal Plan

A successful barrier removal plan for the residential cogeneration market will need to include the following
elements: (1) demonstration projects to prove reliability, product performance, and applicability to the U.S.
market; (2) published results in case studies or white papers to prove energy savings and environmental
benefits; (3) and utility funding or other incentives to partially offset the initial cost of the residential
cogeneration unit.

The key ingredients necessary to ensure technology acceptance and thus a successful program include:

• Including electric and gas companies early in process to discuss interconnect policies
• Understanding all safety and technical requirements for installation (e.g., UL approval)
• Establishing a network of trained installation experts
• Warranty support and maintenance agreements
• Available financing to offset initial cost of equipment (optional)
• Targeted consumer advertising/education
• Demonstrated savings, reliability, and performance (e.g., case studies)
• State, federal, and/or utility incentives
III Target Customers and Program Partners
For those residential cogeneration technologies that provide space heating and electricity, EPA should
target regions in the U.S. with at least 6,000 heating degree days (HDD). Initially the Northeastern U.S.
will offer the best opportunity for market entry due to high HDD, high retail electricity rates and current
interest in the technology from utilities and program sponsors in this region. For technologies that
incorporate water heating as a thermal output, EPA will have more flexibility in regards to the U.S. regions
it might be able to influence.

As mentioned above, cost effectiveness is a key market barrier for residential cogeneration. Net metering
helps to improve the economics and EPA should identify areas where net metering is encouraged and
rewarded (e.g., Massachusetts). An initial target market may also be consumers concerned about the
environment and global warming. In this case the target customer may be more conscious about their
carbon footprint and impact on the environment than cost (i.e., purchasing decision not primarily based on
payback).

The following is a list of potential program partners based on U.S. commercialization, market influence,
and current activity in this area:

− Manufacturers: Climate Energy, Marathon (short term) and Ballard, Ceramic Fuel Cells (longer term).
− Industry Associations: Propane Energy Research Council, American Gas Association, U.S.
Combined Heat and Power Association
− Utilities/Program Sponsors: KeySpan; PG&E; PIER/CEC; NYSERDA; Consortium for Energy
Efficiency.

Through previous residential cogeneration work, EPA has established contacts at Climate Energy and
Ballard. In addition, EPA can leverage existing stakeholder relationships developed through the following
ENERGY STAR programs to bring in additional partners: (1) ENERGY STAR Commercial CHP; (2)
ENERGY STAR Labeled Products; and (3) ENERGY STAR Clean Energy.

IV ENERGY STAR ® Potential

The following is a list of ENERGY STAR Guiding Principles that EPA uses to determine whether or not a
product category should be considered for ENERGY STAR specification development:

− Significant energy savings will be realized on a national basis.

− Product energy consumption and performance and can be measured and verified with testing.
− Product performance will be maintained or enhanced.
− Purchasers of the product will recover any cost difference within a reasonable time period.
− Specifications do not unjustly favor any one technology.
− Labeling will effectively differentiate products to purchasers.

The following milestones would need to be met for EPA to consider residential cogeneration under the
ENERGY STAR Labeled Products program:

− Significant energy savings on a national basis or in the case of space heating technologies, significant
savings in heating dominated regions.
− Availability of a verified, industry accepted, and (laboratory) repeatable test procedure for measuring
and comparing energy efficiency performance.
− Availability of technology neutral energy efficiency performance requirements.
− Several manufacturers and models available showing significant differentiation in energy efficiency
performance (i.e., ENERGY STAR specifications represent the top 25% of performers in regards to
energy efficiency performance)
− Identification of any product performance requirements to ensure quality continues to be delivered
with energy efficiency.
− Cost effectiveness (payback of < 4 years).
Based on the market as it stands today, this technology is a good potential long term target for Energy
Star. What is going to take the longest time to develop is a healthy competitive market for this technology,
as it is coming into a market with a strong incumbent technology (namely gas furnaces), the costs remain
high, and the unit shipments and applications are limited due to the lifetime of existing furnaces.

V Implementation Plan
EPA will spend the first phase of this project (i.e., March – September 2008) meeting with potential
program partners; gathering, verifying, and analyzing existing data (e.g., pilot programs, ETV testing);
refining the residential CHP model/evaluation tool; and identifying opportunities to partner in a pilot
program and/or expand implementation plan to other regions of the country. Key elements of the
implementation plan are provided below:

Finalize MicroCHP Model. A Draft MicroCHP model will be shared with a small panel of industry experts
in early April. The model will incorporate the capability to analyze space heating and/or water heating
applications. The model will be refined and finalized in May based on feedback received from the panel
and will be ready to evaluate a portfolio of technologies.

Recruit Program Partners. From May – July, meetings will be scheduled and conducted with
cogeneration manufacturers (e.g., Climate Energy and Marathon), industry associations, and
utility/program sponsors (e.g., KeySpan and NYSERDA). In addition, EPA will attend the Ottawa mCHP
conference April 29 – May 1 to network with and identify additional potential program partners. Given the
seasonal nature of this product, potential pilot programs will need to be lined up in time for the heating
season (October/November timeframe).

Evaluate Pilot Programs. EPA will collect, analyze, and verify data throughout the first phase of this
Plan. EPA will not conduct its own primary data collection but rather review data made available by
manufacturers and other industry stakeholders. This will include coordination with the ETV Verification
TM
Testing project on the Climate Energy freewatt unit. The ETV Verification Plan should be available in
early April and the initial Verification Report (i.e., findings) may be available by late August. Also, EPA
will review results from various pilot programs already conducted in the U.S. (i.e., Climate
Energy/KeySpan). Based on this evaluation, EPA will identify lessons learned, refine current approaches,
and expand the pilot program to other regions of the U.S. A proposed Pilot Program Plan will be
developed by October 3, 2008.

Develop Guidelines for Residential CHP Program Delivery. EPA will develop a set of program
implementation guidelines based on knowledge of the technologies and lessons learned from early
adopters. The document will also provide recommendations for potential implementing partners,
including manufacturers, utilities, or other interested parties.

VI Timeline
Attached is a proposed timeline for the various tasks and milestones presented in the Implementation
Plan above.
Available
Weak
Key

Commercially
score, 0-10)
(Alternative:
Favorable
Satisfactory

Commercially
Available

Not widely adopted

Multiple Suppliers

Capable business
partners

Demonstrated
Performance

rd
3 Party Standards
Attachment A: Assessment of EPA Selection Criteria

Significant potential to
reduce GHG

Potential to be cost
competitive

Matched to EPA skills

Attachment B: Residential CHP Initiative Milestones and Timeline